Following Q2 2019 financial results, NeuroMetrix has sought help from investors in an effort to restructure its business and is turning away from a direct-to-consumer business model for its wearable pain relief platform, Quell.
The company also laid off more than half of its staff since the beginning of 2019.
“We have engaged outside expertise to help optimize the value of our business. The restructuring that we initiated in June was a difficult but essential step to better align our operating structure with current revenues,” said Shai N. Gozani, M.D., Ph.D., President and Chief Executive Officer of NeuroMetrix. “We are pleased with the DPNCheck performance, particularly in our domestic market, which offset variable timing of international sales, particularly in Mexico. With Quell, we are working to find the optimal commercial approach to deliver profitable sales with a modest investment in digital advertising. We continue to believe in the effectiveness and unique benefits of the Quell technology. Finally, we continue to seek resolution of the previously disclosed Federal Trade Commission (FTC) matter which is centered on Quell advertising.”
In Q2 2019, NeuroMetrix’s total revenues were $2.4 million versus $3.8 million in the prior year period, a decrease of 37%.
Gross margin was a negative $0.8 million after recording an inventory charge of $1.9 million. Excluding the inventory charge, gross margin of $1.1 million represented a gross margin rate of 47.0% in comparison with the gross margin rate of 48.0% in Q2 2018.
A crucial element in this decrease was declining consumer interest in the Quell product, which dipped to $0.8 million in the quarter after recording $1.6 million in Q1 2019 and $2.1 million in Q2 2018. According to Gozani and Chief Financial Officer Thomas Higgins, much of the drop is attributed to NeuroMetrix scaling back its advertising efforts since last year’s major push. However, the company is also contending with excess stock of Quell 2.0 parts that racked up $1.9 million in inventory costs during the quarter, reports MobiHealthNews.
“It is a process that will take time, and ultimately some financial resources,” Gozani said. “Consistent with our commitment to evaluate all options for the business, in parallel, we are exploring options to sell some or all of the Quell business and intellectual property.”